Disengagement Tax: The Hidden Cost Leaders Can’t Afford to Ignore
- Eddie Geller
- Apr 1
- 2 min read
Updated: Apr 18
April isn’t just tax season for the IRS (U.S. Tax Authority)—it’s also a wake-up call for leaders facing a silent but devastating drain on their organizations: the Disengagement Tax. Unlike financial taxes, this one isn’t neatly filed away on April 15th. It compounds daily, eroding productivity, morale, and profits. Gallup research estimates that employee disengagement costs the global economy a staggering $8.8 trillion annually. Can your organization afford to pay it?
Every leader expects to pay their fair share in taxes, but what about the tax they don’t see—the one that drains energy, productivity, and profits right under their noses? The Disengagement Tax isn’t a line item on your P&L, but make no mistake: it’s eroding your bottom line every single day. Unchecked disengagement is a financial liability, hitting companies with absenteeism, turnover, and lost innovation.
What Is the Disengagement Tax?
It’s the cumulative cost of employees who are physically present but mentally checked out. It shows up in missed deadlines, lackluster performance, customer dissatisfaction, and increased turnover. And unlike the IRS, disengagement doesn’t wait until April 15th—it is paid out every day, sapping the strength and balance sheets of teams and organizations alike.
The Bad News: The Disengagement Tax is Expensive
According to Gallup, disengaged employees cost companies up to 34% of their salary in lost productivity–that’s nearly $23,000 out of $66,622 (the average U.S. salary). Now multiply that across an organization, and the financial hit is staggering.
Lost Productivity: Disengaged employees are more likely to call in sick and arrive late, impacting team productivity and momentum.
Stalled Innovation: Disengaged employees aren’t motivated to contribute new ideas or solve problems proactively.
Turnover: Employees who don’t feel connected to their work leave, costing companies an average of one-third of their salary to replace them.
The Good News: You Don’t Have to Pay It!
Unlike Federal taxes, the Disengagement Tax isn’t inevitable. Leaders who prioritize engagement can reclaim these lost dollars and unlock untapped potential within their teams.
Over the next 4 weeks, we’ll explore how to lower the Disengagement Tax by measuring culture using theSKOR’s 3C’s:
Cohesion: A strong, aligned team creates energy, engagement, and collaboration.
Clarity: Clear expectations, accountability and goals eliminate confusion and wasted effort.
Courage: Leaders who empower employees to take initiative, innovate, and commit fully to doing their best work.
If you’re serious about lowering costs and increasing performance, it’s time to audit your workforce performance by using SKOR, starting with the SKOR Preview. The IRS may not care about disengagement, but your business can’t afford to ignore it.
Throughout April, we’ll dive into the Disengagement Tax and apply SKOR’s 3C’s of culture measurement to help leaders identify, reduce, and prevent this costly burden. Stay tuned as we break down actionable strategies each week to eliminate this hidden tax through increased Cohesion, Clarity and Courage.
(Article 1 of a 5-part series)
